Sunday, January 30, 2011

"Positive" Schengen report for Romania: Bucharest

28 January 2011

(BUCHAREST) - A report by independent experts presented in Brussels on Friday confirmed that Romania "met the criteria" for joining the Schengen area, the Romanian interior ministry said.

"The evaluation report on Romania regarding the Schengen information system (SIS) was approved this Friday during a reunion of the evaluation group", according to a ministry statement.

"This report is positive, it underlines that Romania fully meets the Schengen criteria related to the SIS and it was accepted by the member states, including by the French representative, who previously requested additional time to study it", Bucharest added.

According to Romanian authorities, the previous six reports concerning the country's preparations have also been positive.

Romania was hoping to join the visa-free Schengen area in March 2011, but countries like France and Germany have voiced their opposition, saying Bucharest still had to make progress in the fight against corruption and organised crime.

French Minister for European Affairs Laurent Wauquiez recently said that premature entry of Romania or Bulgaria into the Schengen zone could pose a security risk to Europe.

"If the database of information for the Schengen area were to end up in the hands of international criminals, it could do away with all of European internal security".

But Romania has stressed that it had been connected to the SIS since early November and that "no problems of the kind have been recorded over this period".

The Schengen zone covers 25 member countries of the EU, with more than 400 million citizens being allowed to move freely without other internal border controls.

AP: Romania's President says his country fully supports Croatia's EU bid

BUCHAREST, Romania - Romania's president says his country fully supports Croatia's bid to join the European Union.

Traian Basescu said Friday after a meeting with Croatian Prime Minister Jadranka Kosor that Romania's position is not subject to interpretation. Kosor is in Romania on a one-day official visit.

Earlier this month Romania's foreign minister Teodor Baconschi was quoted as saying Romania might request that the EU monitor Croatia's justice reforms just as Romania's have been since it joined the EU in 2007. Baconschi later said his statement was twisted.

Thursday, January 27, 2011

Romania Has Best Wind Energy Sites in East Europe, Vestas Says

Vestas Wind System A/S, the world’s largest maker of wind turbines, said Romania has the greatest potential for growth for the wind energy industry in eastern Europe during the next five years.

The Balkan nation may produce as much as 14,000 megawatts of wind energy and may develop into a sustainable market, Hans Joern Rieks the company’s president for central and eastern Europe, said at press-conference in Bucharest. Vestas, which opened its first office in Romania today, aims to complete the installation of 450 megawatts of new generation projects by the end of the year.

Romania is attracting investors in wind power because of its location along the western shore of the Black Sea, where the average wind speed stands at about 25.2 kilometers per hour. The local industry has the potential to generate as much as 30.7 billion kilowatt-hours a year, powering the equivalent of Ireland, Serbia or Peru and giving Romania an edge against other east European nations.

“Romania is the market that has the greatest potential on short- to medium-term,” Rieks said. “In Bulgaria, they have all the constraints, and the market would have to mature over time. Ukraine has also a good green energy potential. They have a great wind resources, they have a good electric infrastructure, but they are not far enough in developing the whole system.”

Vestas has installed 22 wind turbines in Romania, with a total capacity of 44 megawatts, according to the latest data available as of June 30.

“I cannot tell you the exact figures at the end of 2010 until we publish the financial results, but I can tell you that the installed capacity is much bigger than the 44 megawatts,” said Catalina Dragomir, the company’s country sales manager.

The Randers, Denmark-based company currently has under construction three wind projects in Romania in the southern region of Dobrogea. Two of them, with a total capacity of 228 megawatts, are for EDP-Energias de Portugal SA, Portugal’s biggest utility.

Other companies installing turbines in Romania include EDP, CEZ AS, which is the Czech Republic’s largest power distributor, E.ON, Germany’s biggest utility, Iberdrola SA and Enel SA.

To contact the reporter on this story: Andra Timu in Bucharest at

To contact the editor responsible for this story: James M. Gomez in Prague

Romania urged to offer Roman site for UNESCO listing


BUCHAREST — The panel in charge of Romania's historical monuments on Wednesday urged the Culture Ministry to propose the Roman remains of Rosia Montana for inclusion on the UNESCO World Heritage list.

The National Commission for historical monuments recommended that the ministry initiate steps "to include Rosia Montana on its tentative list" for UNESCO World Heritage, its president, Virgil Polizu, told AFP.

The inclusion of a historical site in a country's tentative list is the first step in the lengthy process that can lead to a UNESCO World Heritage listing.

The commission's appeal came after the Romanian Academy as well as several organisations involved in preserving the nation's cultural heritage warned against "the threat posed" by a Canadian gold mine project to Rosia Montana and its ancient galleries dating back to Roman times.

But, the mayor of the village, Eugen Furdui, and some local organisations oppose the move as they fear it will compromise the gold mine project and future jobs.

"If Rosia Montana were added to the UNESCO World Heritage List, that would automatically mean that mining cannot go through. And we want this mining project to be carried on," Furdui told AFP last year.

The Academy, the National Union of Architects and non-governmental organisations from Rosia Montana have repeatedly called on the Culture Ministry to offer Rosia Montana for inclusion on the UNESCO World Heritage list.

Rosia Montana, a picturesque Carpathian mountain village, is said to hold one of the biggest gold deposits in Europe.

In 1999, RMGC, a subsidiary of Canadian firm Gabriel Resources, obtained a licence to mine gold there.

More than a decade later, the firm has still not been granted all the required environmental and archaeological permits though it insists its project will preserve the local heritage and environment.

Wednesday, January 26, 2011

IMF mission starts visit in Romania, new deal considered

25 January 2011

(BUCHAREST) - The International Monetary Fund (IMF) started a new mission to Romania on Tuesday to examine recent reforms and start talks on a new agreement, a spokeswoman told AFP.

The mission is in Bucharest until February 8 and is to meet authorities, as well as union leaders, business associations and banks representatives.

The IMF representative in Romania, Tonny Lybek, said earlier this month that the mission would evaluate the country's "recent economic performance and discuss with the authorities the economic objectives for the remaining period of the current stand-by arrangement".

"The mission will also initiate negotiations on a possible successor arrangement," he had added.

Earlier in January, Romania's central bank said Bucharest had planned to conclude a new agreement with the IMF and the European Union when the current bailout deal expires, in April.

Romanian authorities said they wanted a precautionary credit line under which funds are drawn upon only in case of a major crisis.

In May 2009, crisis-hit Romania obtained a two-year 20-billion-euro lifeline from the IMF, the EU and the World Bank in exchange for key reforms aimed at slashing public spending.

Boost for Romania as fund lists

The Financial Times
January 25, 2011

by Chris Bryant

Fondul Proprietatea’s shares rose after listing on the Bucharest Stock Exchange amid high hopes that one of eastern Europe’s largest property restitution funds will draw new foreign institutional investors to cash-strapped Romania.

Shares in the €3.6bn fund which holds stakes in 83 companies – most of them unlisted and weighted heavily towards the energy sector – traded at 0.62 lei, well above the previous over-the-counter price of about 0.5 lei.

For Romanians who lost property under communism and who resisted the temptation of selling their FP entitlements at a much lower price on the grey market, Tuesday’s listing was a moment to celebrate after years of delay.

The price is of course far below FP’s estimated net asset value per share of 1.11 lei. But with emerging markets guru Mark Mobius’ fund management company on board to bash heads together in Romania’s corporate sector, analysts believe there is still plenty of value to unlock in FP’s shareholdings.

The most immediate benefit of the listing is likely to be a significant increase in the volume of shares traded on the Bucharest exchange – a relative minnow in the region, with a market capitalization of €25bn.

FP is now the second biggest company listed on the exchange is expected to raise the market’s overall free-float by about 80 per cent.

In anticipation of this, the BSE was in December the best performer by capital returns among members of the FTSE Mondo Visione Exchanges Index, with 18.2 per cent increase in share price.

The prospect of new capital flows is particularly welcome at a time when Romanian companies and consumers are struggling to obtain bank finance and the state remains on the hook to the IMF and EU for a €20bn credit line.

Whether foreign institutional investors are prepared to take the plunge by investing in the shares of FP or other Romanian companies will depend on how Romania’s long-suffering government behaves in the coming weeks.

Mobius’ Franklin Templeton Investment Management has already squared up to the government over its decision to request a Lei 400m donation from Romgaz, the natural gas producer in which FP holds a 15 per cent stake.

But ministers are also planning further privatisation in the energy sector over the next couple of years, which could provide an attractive opportuntiy for emerging market investors, as well as a much-needed boost to Romania’s battered public finances.

As Mobius told Tuesday’s Financial Times, FP could be a “shot of adrenaline” into the system. Recession-hit Romania should feel the benefit, so long as the government plays its part.

3,000 Romanian auto workers protest fuel prices

BUCHAREST, Romania (AP) — About 3,000 auto workers at a French-Romanian carmaker Dacia Renault plant have protested budget cuts and fuel price hikes.

Workers opposed to President Traian Basescu shouted "Down with the government!" and "Down with Basescu!" Tuesday in the southern city of Mioveni, 120 kilometers (75 miles) northwest of Bucharest, footage on Realitatea TV showed.

Last year, the government cut public workers' salaries, increased the sales tax from 19 to 24 percent and cut child benefits to meet demands by the International Monetary Fund and gain a euro20 billion ($27.2 billion) loan for the country.

There has been widespread discontent with the budget cuts and fuel price increases in recent months.

Lukoil to Shut Romanian Oil Refinery for Maintenance Next Month

OAO Lukoil, Russia’s second-biggest oil producer, plans to shut its Petrotel refinery in Ploiesti,Romania, for maintenance next month.

“We are having a planned shutdown for February,” Daniela Danulescu, a company spokeswoman, said today in an e-mailed statement. The halt will last as long as two weeks for “regular equipment inspections.”

The Petrotel-Lukoil plant can process 48,600 barrels of crude oil a day, according to data compiled by Bloomberg.

Refiners have to periodically shut production for repairs and inspections to ensure efficient operations and to detect potential problems.

To contact the reporter on this story: Nidaa Bakhsh in London at

To contact the editor responsible for this story: Stephen Voss at

Tuesday, January 25, 2011

Romanian property fund to lift bourse liquidity

BUCHAREST, Jan 25 (Reuters) - Shares in Romania's Fondul Proprietatea, designed to repay property owners dispossessed by the communist regime, rose on their market debut and analysts expect the listing to attract foreign investors to the country's nascent capital markets.

The 3.6 billion euro ($4.92 billion) fund -- managed by Mark Mobius's Franklin Templeton Investment Management -- has the potential to boost liquidity on Bucharest's BET exchange and lure foreign investors, analysts say, as it offers them an easy way to invest in the country's energy sector, where it holds stakes in unlisted companies, such as Romgaz.

"The Fondul portfolio has the potential to attract funds from foreign investors who would then be able to invest in companies on the local market, which would close a gap in performance between the local bourse and those of the region," said Ioan Burzo, analyst at Romania's BT Asset Management.

Romania, which depends on a 20 billion euro International Monetary Fund-led bailout, needs more foreign investment to pull out of a deep recession and catch up with the rest of the European Union, of which it is the second poorest member.

Fondul shares were trading at 0.63 lei ($0.202) by 0813 GMT, compared with about 0.50 on the over-the-counter market in recent days, according to local news agency SeeNews.

Its traded volume vastly outweighed that of the BET, which includes Romania's top 10 traded public companies.

The closed-end fund was created to compensate citizens whose property was confiscated during communism and it holds shares in more than 80 state-owned and former state companies, mainly in the energy sector. It also holds shares in Petrom (SNPP.BX: Quote) (OMVV.VI:Quote), Transgaz (TGNM.BX: Quote) and Transelectrica (TSEL.BX:Quote), all of which Fondul's manager Franklin Templeton expects the government to sell shares in over the next couple of years. [ID:nLDE70J178]

The state controls 39 percent of Fondul and Franklin Templeton expects that stake to fall below 33 percent later this year. A further 42 percent belongs to individuals. (Reporting by Sam Cage and Marius Zaharia; Editing by Louise Heavens) ($1=.7323 Euro) ($1=3.124 Lei)

Romania fund is ‘a shot of adrenaline’

By Chris Bryant in Vienna
Published: January 24 2011 
The Financial Times

Potential foreign investors in Romania, one of the European Union’s poorest countries, have often been frustrated by its comparatively underdeveloped capital market, weak corporate governance and slow pace of privatisation.

Mark Möbius, executive chairman of Templeton Emerging Markets Group, hopes to change that with the listing on the Bucharest stock exchange on Tuesday of Fondul Proprietatea – south-east Europe’s largest property restitution fund.

Romania’s government set up the €3.6bn closed-end fund in 2005 to compensate those whose property was confiscated during Communist rule.

Rather than award cash to victims, the state allotted claimants a share in a pool of 83 state-owned and formerly state-owned companies, most of them unlisted, and concentrated in the energy sector.

The fund’s key shareholdings include 10-20 per cent stakes in Petrom, Romania’s largest oil company, Romgaz, the natural gas producer, and Transelectrica and Transgaz, the power and gas transmission companies.

Franklin Templeton Investment Management took over the management of the fund in September last year in order to prepare to list it on January 25.

“You might call it a sovereign wealth fund for the country,” Mr Möbius told the Financial Times. “It’s a tremendous responsibility for us, not just to the country but to people who have been waiting years and years for compensation”.

The listing comes at a pivotal moment for Romania, a recipient in 2009 of a €20bn ($27bn) bail-out from the International Monetary Fund.

The country is struggling to pull out of recession due to some of the continent’s toughest austerity measures. The government has recently faced a succession of no-confidence votes that have added to market uncertainty.

Analysts say Fondul Proprietatea has the potential to provide a huge boost to the liquidity of the Bucharest stock exchange and thereby help attract new overseas institutional investors. Following the listing, the property fund will be the second-biggest company on the exchange by market capitalisation and is expected to increase the stock market’s overall free float by 81 per cent.

“There’s no question – this is going to be a shot of adrenaline to the system,” says Mr Möbius.

The government holds 39 per cent of the fund, having steadily cut its ownership. As a result approximately 5,200 individuals now control about 42 per cent of the share capital. The state’s holding is expected to fall below 33 per cent this year, after which it will effectively cede control of the fund.

Templeton plans to sell off smaller, unprofitable parts of the portfolio and shake up transparency and corporate governance at the remaining companies.

“These are companies where there is potential for increasing profitability and efficiency under a capable portfolio manager,” said Petar Atanasov, vice-president of the Balkan Advisory Company, a brokerage and investment manager.

Templeton has already assumed the role of activist investor by initiating legal action against the directors of Romgaz who approved a Lei 400m ($127m) “donation” to the state budget at the end of last year.

The fund manager has also successfully challenged a proposed restructuring of the country’s electricity sector, which threatens to combine valuable parts of its portfolio with less attractive assets.

“We’ve got to put people on notice at these companies ... Where something is wrong we have to take action in the interests of shareholders,” Mr Möbius explained.

These conflicts have underscored the risks for investors, whose interests may not always be aligned with those of the Romanian state.

Nevertheless, analyst reaction to the listing has been broadly positive, with the fund viewed as a proxy for the Romanian energy sector which has been difficult for financial investors to access in the past.

Due to the time it has taken for Fondul Proprietatea to come to market, many restitution claimants have sold their titles to private investors on the grey market at discounts of more than 60 per cent.

Templeton’s first task will therefore be to raise the stock price to the level of net asset value, which the investment manager has calculated at 1.11 lei per share.

Monday, January 24, 2011

AP: Court in Romania rules against army pension cuts


Romania's high court has ruled that army pensions cannot be cut by authorities as planned.

The court said Friday that pensions are considered property and cannot be reduced. Thousands of army retirees accuse authorities of slashing some pensions in half, calling the cuts illegal and humiliating.

Authorities say only top level pensions will be cut.

Romania's government introduced legislation to recalculate pensions, saying it would bring equity to the system in the recession-mired country.

The Financial Times: Romania: a €3.6bn power pack

January 21, 2011 
by Stefan Wagstyl

The listing of Fondul Proprietatea, a €3.6bn investment fund, on the Bucharest stock exchange on January 25 could transform the Romanian equity market – as long as the country’s politicians and bureaucrats don’t get in the way.

The fund, a trust for compensating Romanians dispossessed under Communism, will boost the €22bn market value of the Romanian stock market by around 15 per cent and the value of domestic equities by around a third. With large chunks of BSE-listed stock held by the state or foreign multinationals, the domestic equity free float will soar 80 per cent. For fund managers, there will suddenly be a lot more to go for. But, needless to say, there are caveats.

Fondul (FP) comes to market with a lot in its favour. It has a portfolio of stakes in 83 state and ex-state companies mostly in energy. They are headed by a €891m interest in Petrom, the oil group controlled by Austria’s OMV, €767m in Hidroelectrica, the state-run hydropower operation, and €291m Romgaz, the state-run gas company.

Formed by the government in 2005, the company has seen its state shareholding fall to 39 per cent as it has honoured dispossession claims and will fall further as more claims are accepted. Keen to improve management and boost the valuation, Bucharest last year hired Franklin Templeton of the US to manage the fund.

And, as beyondbrics has reported, Templeton has not been afraid of tackling the government head on, successfully challenging an ill-inconceived electricity restructuring plan and, in a dispute that is still rumbling, arguing over a lop-sided special dividend paid by Romgaz to one shareholder only (the government).

With the share trading recently in the over-the-counter market at around 0.52 lei there would seem to be plenty of upside. Raiffeisen, one of the banks backing the listing, says that given the political risks involved it is right to apply to the fund’s estimated net assets of €3.3bn a discount of 20 per cent. This gives fair value of €2.7bn and a share price of 0.84 lei. Raiffeisen sees considerable scope for gains as Franklin Templeton gets to grips with the portfolio and forecasts a 12-month target price of 0.96 lei.

But much depends on the political risk. An investment in FP is a multiple bet – on the government’s policies towards FT, towards energy and towards the economy as a whole. The economic history of Romania since the overthrow of Communism in 1989 is a history in which the politics of energy have figured prominently from miners’ strikes in the early years to later privatisation disputes.

If Romania, a European Union member since 2007, is now committed to developing a market-oriented energy sector (albeit a regulated one, as in many EU states), FP looks a steal. The country is around a decade behind the most developed of the ex-Communists states which have joined the EU, notably Poland. So if Bucharest stays the course, there is plenty to go for.

But, the track record is one of lurching progress rather than consistent development. A financial crisis forced reform in 2000; more followed with the push to join the EU in 2004-7; and another advance has come with the global economic crisis which brought the International Monetary Fund, supported by the EU, to Romania with a €20bn rescue programme.

The IMF package is now expiring and in its place Bucharest wants to secure a €3.6bn standby fund, for emergency use only. So the IMF will remain involved but in a weaker position to exert pro-reform pressure. Meanwhile, parliamentary elections are due next year.

Fondul’s fund manager Grzegorz Konieczny says the need to raise money will keep the government backing FP’s plans to modernise the companies in its portfolio and bring them steadily to the stock market.”In order to pay back the IMF programme, the government has to sell holdings. Money is the main driver,” Konieczny said at a press briefing in London on Thursday.

FP expects to raise nearly €1.5 billion selling shares in its top companies in the next few years. It plans to sell shares of energy groups Petrom, Transgaz and Transelectrica later this year in a secondary market

Konieczny said Petrom was likely to raise 400-500 million euros, while Transgaz
and Transelectrica would each raise around 50 million euros. Romgaz and power companies Hidroelectrica and Nuclearelectrica could come to the stock market via IPOs in 2012.

All succulent prospects for the shareholders, not least those long-suffering Romanians who got their stock because their property was seized under Communism 50 and more years ago. Capitalism is bringing them their long-awaited compensation, but how much remains to be seen.

Friday, January 21, 2011

Romania to Build Second Nuclear Plant by 2025, Adevarul Says

Romania plans to build a nuclear power plant by 2025 and two reactors at the existing Cernavoda plant by 2020, newspaper Adevarul reported today, citing a government draft energy paper.

The Economy Ministry plans to build a second nuclear plant with one reactor with a capacity of 1,100 megawatts and cogeneration units with a total capacity of 1,820 megawatts by 2020, the newspaper reported, citing the first draft of the 2011-2035 strategy document it obtained.

The country’s energy sector needs investments worth as much as 40 billion euros ($54 billion) by 2035 to build plants with a total capacity of 14,800 megawatts, out of which 9 billion euros should go into wind energy production units, according to the newspaper.

To contact the reporter on this story: Irina Savu in Bucharest at

To contact the editor responsible for this story: James M. Gomez in Prague

World Bank Approves 300 Million-Euro Loan Payment to Romania

The World Bank agreed to disburse 300 million euros ($406 million) to Romania after the country passed wage and pension legislation last year to meet the terms of its international bailout agreement.

The Washington-based lender’s executive board approved the payment yesterday, the second from the 1 billion euros the World Bank contributed to a larger international loan awarded to the Balkan country in 2009 to help finance the budget, it said in an e-mailed statement today. The payment brings the total disbursed from the World Bank’s portion of the loan to 600 million euros.

Romania, the second-poorest European Union member, is missing out on Europe’s recovery after international lenders pressed the government to raise taxes, cut pension spending and reduce state wages to curb the deficit, sparking protests. The country passed a 2011 state budget, wage and a pension laws last year to qualify for the payments.

The loan “supports the government’s structural reforms in three key areas: improving fiscal sustainability, enhancing social protection systems and strengthening the financial sector,” the statement said. “While financing a relatively small share of the bailout package, the loan program targets structural reforms which will considerably improve Romania’s medium- to long-term outlook for sustainable development.”

The east European country may win a new two-year loan from the World Bank and a precautionary agreement from the IMF and the EU this year, World Bank European Country Director Peter Harrold told reporters in Bucharest on Jan. 18.

The remaining 400 million euros from the bank’s current loan is scheduled to be disbursed during 2011.

The last payment will probably be included in the next agreement, pending further changes in health care, welfare and taxation to boost budget revenue by as much as 20 percent over the next three to four years, Harrold said.

To contact the reporter on this story: Irina Savu in Bucharest at

To contact the editor responsible for this story: James M. Gomez in Prague

Romanian designers aim to ditch reputation for ostentatious fashion

By Mary Lane (AP)

BERLIN — Romanian fashion has had a reputation for being ostentatious ever since communism's fall in 1989, when colour-deprived designers used garish shades in over-the-top attempts at haute couture.

Yet at Berlin Fashion Week, which wraps up Saturday, Romania's top designers have shown more mature collections — still colourful and affordable — which may finally sell in the Western European markets they long to break into.

Irina Schrotter, whose label was founded in 1990, was the most established Romanian designer at the show and created the fledgling Romanian Fashion Week in 1998. But her 2012 winter collection was far from old-style, starring black flapper-style fringe dresses and skirts, and fluid jackets made of suede or crinkled leather subtly combined with chocolate brown or black jersey.

"I try to dress women like I would love to see me," she told The Associated Press.

Romanian fashion expert Octavian Coifan credits this strategy for Schrotter's success, saying she has captured "a classic style."

Schrotter grew up under despised Romanian dictator Nicolae Ceausescu, whose wife Elena bought the latest European fashions while average Romanians regarded even denim as an illegal luxury.

The designer's passion for fashion required early creativity, such as scrounging for smuggled, tattered German fashion magazines. When, at 14, she bought black-market jeans she said she "was so happy and wore them for six months straight."

Designer Alina Botea shared similar memories of life under Ceausescu, but has created a much more colourful fashion label, a fantastical fusion of 1960s retro and science fiction styles. The 38-year-old's recent collection featured shifts and shorts made of a snowflake print silk in pink, green, chocolate brown and grey. Many dresses even combined the busy fabrics with brown or pink sparkles.

The collection was loud — but not gaudy — resembling American designer Lilly Pulitzer's colourful frocks. It met with audience cheers in Berlin.

"I just like different colours and different fabrics. They make a good statement when you know how to put them together," Botea said.

Berlin Fashion Week defines itself as a springboard for smaller labels that seek increased exposure before jostling for attention with bigger fashion brands in Milan, Paris or London.

The show also featured the "Alice in Wonderland"-inspired collection of Romanian Andreea Musat, and the abstract, artistic designs of Lucian Broscatean.

For now, said Coifan, Romanian designers struggle with an "awful" distribution network and a reputation for producing cheap products for chains like H&M — and designers like Schrotter and Botea remain the toned-down exception.

"The bling-bling era (will) last long in emerging countries, where ostentatious displays of wealth is a rule which we call 'glamour,'" Coifan said.

But Schrotter was optimistic.

"We are here at Berlin Fashion Week to show that Romanian design has made the step to another level," she said.

Schrotter's pieces are all made from start to finish in Romania. It's a technique associated with expensive Italian labels these days, but most of Schrotter's original, handcrafted pieces only cost between US$67 and $400.

"Price is the strongest point of our collections," she said.


Alison Mutler in Bucharest contributed to this report.

Romania Bonds to Rally on IMF, Inflation, SocGen Says

Romanian bonds are poised to extend this month’s gain because the country will probably take a loan from the International Monetary Fund, forcing it to stick with spending cuts, and inflation may slow, Societe Generale SA said.

Investors should buy leu-denominated debt maturing in April 2015 at a yield of 7.14 percent or above, before it drops to 6.70 percent, the French bank wrote in a report today.

Romania may take a loan from the IMF in April, President Traian Basescu said on Jan. 5. Thecredit line may be about 3.6 billion euros ($4.7 billion) and tapped in case of an emergency, Mediafax newswire reported this month, citing unidentified government officials. The European Union’s second-poorest member relies on a 20 billion-euro bailout led by the Washington-based lender to stay afloat.

“It is likely that a new precautionary agreement will be signed,” and this “will add credibility that fiscal consolidation will remain on track,” analyst Monica Nania at Societe Generale’s unit in Bucharest wrote.

The yield on the 6 percent bond fell to a record low of 7.11 percent Jan. 11 from 7.4 percent at the beginning of the month after the government said on Jan. 4 it reduced the 2010 budget deficit to 6.8 percent of gross domestic product, a limit set out in its loan agreement with the IMF. The yield was 7.2 percent at 5:40 p.m. in Bucharest, data compiled by Bloomberg show.

Deficit, Inflation

Prime Minister Emil Boc’s administration cut public wages by 25 percent last year and raised the value-added tax to 24 percent from 19 percent to bring down the deficit from 7.2 percent of GDP in 2009 after a recession eroded budget revenue. Boc plans to cut the shortfall to 3 percent by 2012.

If implemented, the austerity program “would reduce gross borrowing requirements in the medium term, which should in turn offer support to bonds with longer maturities,” Nania wrote.

Inflation accelerated to 8 percent in December, the highest annual rate in more than two years, as the increase in VAT in July boosted prices. With the effect of VAT changes on prices dwindling, the inflation rate will likely decelerate to less than 4 percent by the end of 2011, according to Nania.

To contact the reporter on this story: Krystof Chamonikolas in Prague

To contact the editor responsible for this story: Gavin Serkin at

Romania may raise 1.5 bln euros in share sales

By Natsuko Waki

LONDON, Jan 20 (Reuters) - Romania's Fondul Proprietatea expects the government to raise nearly 1.5 billion euros ($2 billion) selling shares in state-owned companies in the next couple of years, the fund's manager said.

Franklin Templeton, which manages Fondul -- a fund created to compensate citizens whose property was confiscated during communism -- said the government planned to sell shares of energy groups Petrom (SNPP.BX: Quote) (OMVV.VI: Quote), Transgaz (TGNM.BX: Quote) and Transelectrica (TSEL.BX: Quote) later this year in a secondary market.

Fondul's fund manager and Templeton's chief executive Grzegorz Konieczny told a briefing in London on Thursday that the Petrom stake is likely to fetch 400-500 million euros, while Transgaz and Transelectrica would each go for around 50 million euros.

He added gas producer Romgaz and power firms Hidroelectrica and Nuclearelectrica may place initial public offerings in 2012, possibly each for about a few hundred million euros.

Recession-hit Romania, which received a 20-billion-euro bailout deal from the International Monetary Fund, plans to cut its budget deficit partly through the stake sales but political bickering and poor market conditions have caused delays.

"In order to pay back the IMF programme, the government has to sell holdings. Money is the main driver," Konieczny said.

The state controls 39 percent of the Fondul fund itself, with a further 41 percent belonging to individuals -- some of whom lost property after leaving Romania during the communist era.

Certain restrictions apply to the voting rights for large holdings, until the state control falls below 33 percent.

Konieczny said the government's holdings will fall below this critical 33 percent later this year.

"We expect the government to effectively lose control of the fund this year," he said.

Konieczny said the fund may consider a secondary share listing either in London, Warsaw or Vienna and will put recommendations to shareholders this summer.

David Smart, global head of sovereign and supranational funds at Franklin Templeton, said the fund should appeal to other sovereign wealth funds keen to gain exposure to energy and infrastructure industries.

The fund holds stakes in 83 private and state-owned companies, with its portfolio weighing heavily on power, oil and gas sectors, and aims to list shares on the Bucharest Stock Exchange next week.

Templeton said this will triple liquidity in the stock exchange, boosting the appeal of Romania.

"It can be a proxy for Romanian allocation," Smart said. ($1=.7413 Euro) (Editing by Sam Cage and Jon Loades-Carter)

GDF Said to Pull Out of Venture Building Romania Nuclear Plants

GDF Suez SA will pull out of an agreement to build two nuclear reactors in Romania, a person with knowledge of the matter said.

The company is withdrawing from the venture because it’s been unable to agree a regulatory framework for the project, the person said, declining to be identified before an official announcement.

The EnergoNuclear venture planned for the first reactor to start in 2017, according to its website. The government currently owns 60 percent of the venture, which also includes Italy’s Enel SpA, Iberdrola SA of Spain, GDF Suez, Germany’s RWE AG and steelmaker ArcelorMittal.

To contact the reporter responsible for this story: Tara Patel in Paris at

To contact the editor responsible for this story: Will Kennedy at

Thursday, January 20, 2011

Romania: Year in Review 2010

Oxford Business Group

A year of tough economic decisions for Romania’s future ended with some success, as a fiscal deficit reduction plan proved effective and growth looks set to return in 2011. Energy privatisation plans continue to take shape, and national success story Dacia has laid the groundwork for continued international expansion.

Romania’s economy suffered a serious recession in 2009, with the economy contracting by 7%. Particularly hard hit was the construction sector, which had previously been a major contributor to growth, but fell 24.4% in the 12 months to the end of November, by far the most dramatic drop in Europe.

Several factors contributed to the decline in construction activity, including a sharp drop in lending as liquidity tightened and banks looked to scale back market exposure. In addition, falling consumer spending sapped demand for retail space, and the commercial property segment weakened as firms, including some foreign investors, reduced or reversed local expansion plans. The drop caused construction to slow almost to a halt, in stark contrast to the exuberance of the year before, with just 37% of housing projects started inBucharest between 2006 and 2008 completed by the end of July 2009, according to the National Institute of Statistics.

The speed of the recovery has been somewhat slowed by the government’s need to cut the deficit after several years of loose fiscal policy. In January 2010, parliament passed a budget aiming to cut the deficit to 5.9% of GDP (later revised to 6.8%) after it reached 7.3% in 2009, including measures to freeze wages and state pensions and cut public employment to meet requirements set by the IMF and EU for the resumption of payments from a $27.8bn support package.

Some relief came from a 5% value-added tax (VAT) cut on construction costs, and the National Bank of Romania’s (BNR) assiduous lowering of interest rates. However, the main story of the year was the fiscal tightening, which, by year end, had succeeded in helping cut the deficit to 6.6%, beyond the revised IMF target. Prime Minister Emil Boc’s government raised the general rate of VAT to 24% from 19% in July, while state salaries were cut by a quarter and new taxes were imposed on income from bank deposits, though a proposed 15% cut in state pensions was ruled unconstitutional. While the end of 2010 has seen some relief that Romania was able to reduce the deficit, the government suffered from a sharp drop in popularity, and Boc had to weather three confidence votes in parliament, the most recent in December. The political atmosphere remains febrile.

As uncertainty reigned over the fiscal situation and the state of the European economy, forecasts of Romania’s economic scorecard for full-year 2010 varied widely, from a contraction of 3% to meagre growth. The most recent estimate, by Romanian bank BCR in December, was of a 2.1% drop – painful, certainly, but not as drastic as it could have been, given the situation.

Given the economic travails, it is perhaps unsurprising that anticipated reforms and investments have progressed slowly. In June, the Romanian government announced that it was planning a major restructuring of the energy sector through bundling electricity utilities, part-privatising state-dominated companies and seeking local and foreign investments. The plans involved the creation of two major energy utility companies with a mix of different power stations, and opening them up to private investment. The government is also looking further to privatise gas firm Romgaz, in which it has an 85% share.

Romania has a great deal of energy potential, given its powerful nuclear plant, Cernavoda, its strategic location, experience in the sector and relatively low costs. However, some parts of the infrastructure and many facilities are not yet up to EU standards, and as much as $10.7bn of investment is needed to improve them, according official estimates – cash that the government is short of at present.

Consolidation and privatisation plans have not progressed as quickly as initial reports had suggested, and a dispute over Romgaz between the Romanian government and a private shareholder with the remaining 15% stake may be a further setback. However, on January 10, the local press reported that 15% of Romgaz and state-owned energy firms Transelectric and Transgaz will be sold off in the second half of 2011. In the medium to long term, Romania’s energy sector will need more of the expertise and capital brought by private investment, while the state would benefit considerably from the revenues generated by further privatisation.

Meanwhile, one of the country’s great success stories, automaker Dacia, goes from strength to strength. Dacia, owned by France’s Renault, is planning to boost its annual European sales by almost 50% in the next four years, it was reported in October. The increase, from 350,000 to 550,000, is the latest move in the Romanian firm’s international expansion, after several years of success in emerging markets. As part of the growth plan, Dacia will enter new markets such as the UK, where it will launch in 2012. It would also likely prove a welcome boost to Romania’s wider automotive industry, particularly component suppliers, which have flourished as Dacia, which exports 85% of its output, has grown.

After a tough 12 months of retrenchment and fiscal austerity, things are beginning to look up for Romania, with growth expected over the coming three years.

The Economist: Let us in

Ex-communist Europe
Eastern approaches
Romania v France

Let us in

Jan 19th 2011, 21:44 by T.N. and R.W-M. | LONDON AND BUCHAREST

BUCHAREST was once known as the "Paris of the east". But Parisians might be advised to steer clear of the Romanian capital, at least until the latest row between the French and Romanian governments blows over.

Relations between the two countries have largely been smooth since Romania's accession to the European Union in 2007. At least until last August, when Nicolas Sarkozy ordered the expulsion of Romanies illegally living in France, most of whom had Romanian citizenship. It wasn't long until accusations of opportunism and even racism came flying France's way.

But Romania was keen not to ruffle too many plumes. It knew it needed French support for its accession to the EU's passport-free Schengen area, due this March. Unfortunately, that appears to be exactly what it has lost. Despite apparently having passed a technical evaluation by Schengen officials last Friday, Romania's bid (as well as Bulgaria's) is being held up by France, as well as Germany, ostensibly over claims that it has failed to get to grips with organised crime and corruption.

The Romanians are, predictably, calling foul. Earlier this week Teodor Baconschi, the foreign minister, suggested that the EU was applying "double standards" to Romania and Bulgaria and risked stoking Euroscepticism among citizens of those countries. The March deadline appears to be a lost hope, but Mr Baconschi is still hoping for accession during Hungary's EU presidency, which ends in June.

News that France and Germany intended to delay Romania's Schengen bid first emergedjust before Christmas. But Romania's response did its cause little favours. First Mr Baconschi threatened to impose extra obligations on Croatia, the EU candidate country closest to accession. He then said that Romania could leave the "co-operation and verification mechanism", a set of rules on tackling corruption to which Romania and Bulgaria signed up when they joined the EU. Separately, a group of Romanian MPs said they would delay ratification of a Lisbon Treaty protocol that would add 18 MEPs to the European Parliament.

When it became clear that Romania was not in a position to make good on any of these threats, Traian Basescu, Romania's president, backed down, if not entirely gracefully. Mr Baconschi said that it was "a mistake" to have turned the Schengen issue into such a big deal. But the damage had been done.

The Schengen dispute will probably sort itself out in the end. A bigger fear is that the row will stoke concerns among the EU's poorer members on its eastern fringes that they are getting a raw deal. A planned squeeze on the EU budget will hit the poorer countries that receive a disproportionate amount of it. Yet this is at best a minor concern to Brussels policymakers consumed by the ongoing euro-zone crisis. Europe's two Parises have never been further apart.

Wednesday, January 19, 2011

Romania Gets 3 Letters of Intent for Nuclear Reactors

Romania’s government received letters of intent from three prospective bidders for a 4 billion-euro ($5.4 billion) contract to build two nuclear reactors on the Black Sea coast, the Economy Ministry said.

The potential bidders include Bechtel Group Inc., a group led by Canadian construction company SNC Lavalin Nuclear Inc. and another led by Russia’s Atomtechnoprom, the ministry said in an e-mailed statement today.

The construction and engineering contract will be awarded by the first half of 2012, according to the statement.

The group led by SNC Lavalin includes Italy’s Ansaldo Nucleare SpA and Romania’s Elcomex IEA SA; the Atomtechnoprom group takes in four other Russian companies, the ministry said.

Construction of the plants will double the number of reactors in Romania to four, each with a capacity of 700 megawatts. Two existing atomic facilities supply about 18 percent of the country’s energy needs.

A committee will assess the documents filed by the prospective bidders to qualify for the next stages of the process: presentation of preliminary offers, final offers, selection of the winner and the awarding of the contract, the ministry said.

EnergoNuclear, the venture formed by the Romanian government with international partners to operate the two reactors, said on its website that the first will be operational in 2017. The government currently owns 60 percent of the venture, which also includes Italy’s Enel SpA,Iberdrola SA of Spain, Belgium’s Electrabel SA, Germany’s RWE AG and steelmakerArcelorMittal.

Romania bought 9 percent previously owned by CEZ AS of the Czech Republic, which withdrew from the project to focus on its domestic investments. Romania will decide at the end of February whether to keep or reduce its stake.

To contact the reporter on this story: Irina Savu in Bucharest at

To contact the editor responsible for this story: James M. Gomez at

Cristian Paturca, Romanian Composer, Dies at 46


BUCHAREST, Romania (AP) — Cristian Paturca, the composer of a song that inspired Romanians in their struggle against vestiges of the Communist government, has died. He was 46.

Pro-TV in Romania reported that a friend said he found Mr. Paturca dead in his apartment Tuesday. Mr. Paturca had been suffering from tuberculosis and long-term liver problems.

Mr. Paturca became one of Romania’s most prominent democracy activists when he wrote “Imnul Golanilor” (“The Hooligans’ Hymn”) in 1990 for antigovernment protesters, who were being called “hooligans” by President Ion Iliescu. The Communist government of Nicolae Ceausescu had collapsed in 1989 in a revolution in which more than 1,300 people died. Romanians then protested for weeks in University Square against the continued presence of former Communists in the government.

The protest was broken up by club-wielding miners in June 1990; six people were killed and dozens injured.

One line from the song, “Better dead than a Communist,” became part of Romania’s post-1989 vocabulary. The word “golan” now means a pro-democracy activist as well as a hooligan.

Dan Voina, who investigated Romania’s revolution, compared “The Hooligans’ Hymn” to France’s national anthem, “La Marseillaise,” which was a rallying call for the French Revolution. “It had an important role that is necessary in popular revolts for the solidarity of protesters,” the newspaper Romania Libera quoted him as saying on Tuesday.

The president of Romania, Traian Basescu, awarded Mr. Paturca the National Cross in April for faithful service, 20 years after he composed the song.

Tuesday, January 18, 2011

The Economist: Romania's evangelical Romanies

Ex-communist Europe
Eastern approaches
Religion in Romania

Romania's evangelical Romanies

Jan 17th 2011 by B.J. | RÂMNICELU

HERE in the remote Romanian village of Râmnicelu, a quiet religious revolution has taken place. Among the local Roma, who make up half the population here, Orthodox Christianity, traditionally the religion of Romania's Roma and non-Roma alike, is giving way to a sparky Pentecostalism.

Grigore Vasile, a Romani preacher, claims to have converted 80% of Râmnicelu's Roma to Pentecostalism since 2008. In May 2010 over 150 converted en masse. The village boasts a Pentecostal Roma church with services in the Romani tongue featuring traditional music. Locals claim that the switch has turned religion from something encountered only at births, marriages and funerals into an integral part of their lives.

And there is evidence that the trend is being replicated elsewhere in Romania. “There is a rising trend of Roma converting to Protestantism,” says Ilie Dinca, president of the National Agency for Roma Affairs, a government body. Research conducted in 2007 by the Roma Education Fund suggests that a fifth of the country's Roma may now belong to smaller religious denominations, mostly Pentecostal but also Catholic and Islamic sects. Other mass conversions are reported to have occurred in the villages of Vale Rece and Tecuci.

Adrian Marsh, an expert on the Roma, estimates that Romani membership of Protestant churches in Romania is growing at about 6% a year, compared to less than 1% for Romania's non-Roma. The converts are coming at the expense of the Orthodox church, which is experiencing a 3.5% annual loss. There are now Romani-language Pentecostal churches across Romania, from the capital, Bucharest, to the provincial cities of Timisoara, Sibiu and Cluj.

What lies behind all this? “First, the [Pentecostal] preachers use the Romani language to touch their congregants. Second, they integrate traditional Roma music into their services. Third, they offer much-needed humanitarian aid,” explains Gele Duminica, from Together, a Roma NGO.

The mass conversions in Râmnicelu, which is in one of the poorest parts of Romania, surprised some non-Roma. The village has earned notoriety in Romania for child marriages. Two years ago the union of a five-year-old girl with a 15-year-old boy caused a national outcry. In 2007 an 11-year-old girl gave birth in the local hospital.

Typically Romani girls drop out of school when they marry. But the director of the schools in Râmnicelu says that girls are now attending classes, and that the boys are better behaved. Locals say the conversions have helped them understand the value of education. Field-officers from the National Agency for Roma attest that conversions have reduced violence, criminality and alcoholism in other parts of the country.

In Transylvania, Florin Cioba, the self-styled "King of the Gypsies everywhere", is a Pentecostal minister. He says the religion is fast gaining ground. "Perhaps the reason for the conversion is historic," he says. "When we were slaves in Romania, until 1856, the Roma belonged to the monasteries of the Romanian Orthodox Church."

But Mr Cioba shows that Pentecostalism is not a panacea for the social blights of the Roma. He is notorious in Romania for having attempted to marry off his 12-year-old daughter in a Romani community.

Romania says must shut aging power plants- report

BUCHAREST, Jan 18 (Reuters) - Romania will have to shut down outdated power plants generating some 30 percent of its electricity capacity by 2020 and replace them with new units, an economy ministry official was quoted on Tuesday as saying.

The European Union state needs to replace more than half its power plants by 2035, said Alexandru Sandulescu, the head of the ministry's energy policies department.

"Romania must shut down power production units totalling 5,544 megawatts, or 28 percent of overall capacity by 2020," Sandulescu was quoted as saying by news agency Agerpres.

"During this time, energy consumption will rise by more than 2 percent a year, so there will be need of new power production units."

Energy investment has been held back for years as successive governments have stalled reforms, privatisations and public-private partnerships, and almost all of the country's coal, gas, nuclear and large hydropower plants are state-owned.

A government plan to restructure producers into two state-owned energy generators -- widely criticised by analysts, the World Bank and foreign investors -- is on hold pending legal challenges. It was supposed to be completed by the end of last year.

Foreign investment in Romania's energy sector has focused primarily on wind energy parks, where firms do not need to partner the state and avoid associated delays.

Czech power group CEZ (CEZPsp.PR: Quote), Italy's Enel (ENEI.MI:Quote), Energias de Portugal (EDP.LS: Quote) and others are currently developing wind energy projects in Romania, lured by the size of the market, good wind and generous support scheme based on green certificates.

Sandulescu also said Romania might see an excess of green certificates in coming years due to large investor interest and will consider selling the surplus to other countries.

In Romania, turmoil fuels nostalgia for communism

The Associated Press
Tuesday, January 18, 2011

BUCHAREST, Romania -- Tears run down Elena Bocanu's careworn cheeks as she lights a candle and places it on the grave, next to chrysanthemums left by another admirer.

The object of her devotion is Nicolae Ceausescu, the communist dictator most Romanians associate with hunger, state paranoia, AIDS-ridden orphanages, and chronic power outages. Today, as the new EU member grapples with economic havoc and widening gaps between rich and poor, more people remember not the dysfunctional final years of Ceausescu's regime but an earlier time in which his state provided basics in exchange for obedience.

"You gave us homes, you gave us gas for heating," says Bocanu, a 72-year-old former cleaning lady who scrapes through on the equivalent of $70 a month.

"Now we are miserable, like dogs."

Such open expressions of admiration for Ceausescu are rare. But as economic hardships grow, polls show many Romanians are looking back fondly at the stability provided by the communist regime.

A September survey by the CSOP polling group showed about half of respondents - 49 percent in a poll with a 2.9 percent margin of error - said life under communism was better than it is now.

In contrast, a survey by the Romanian Institute for Marketing and Polling taken in 2005 amid optimism that EU membership was around the corner had 64 percent of participants believing the country was moving in the right direction under free-market democracy.

The nostalgia for the past is shared in neighboring Bulgaria, which joined the EU with Romania in 2007 and is also in deep economic trouble: a study conducted by the PEW Research Center over 2009 and 2010 showed only 52 percent approving the change to democracy compared to 76 percent in 1991, two years after communism's overthrow.

Romanian frustrations with democracy came dramatically to the fore last month when a man dove about 20 feet (7 meters) from a parliament balcony onto the packed assembly floor.

Adrian Sobaru's leap, broadcast around the world, was an act of protest against cuts to state payments for his autistic son. It struck a chord with many Romanians who saw in it a symbol of the injustices of post-communist society.

"It hurts that we have become mere numbers," Sobaru, a television engineer, told Antena TV shortly after release from the hospital for treatment of fractures to his face and other injuries.

Communist nostalgia is hard to discern in the more affluent parts of downtown Bucharest, where more than two decades of breakneck efforts to catch up with the West have made the capital hard to tell apart from the prosperous cities of the West.

Bucharest in the final Ceausescu years was the darkest capital of the Soviet bloc. A crumbling, fitfully lit metropolis, it was peopled by shivering masses queuing on potholed winter streets for rationed food and afraid to complain because of fears their neighbor was a police informer.

Today, neon pulsates over storefronts offering designer goods, delicacies, luxury vacations, exclusive real-estate and other pleasures. Restaurants run the gamut from kebab to quiche. Sleek German sedans - guaranteed head-turners just a few years ago - speed by unnoticed by throngs of shoppers.

In this part of town communism is a bad word.

"It was a prison," says Mihai Pop, an ornamental glass vendor. "In capitalism you are free to do what you want - make money if you want to, don't make money if you don't want to."

But even the most prosperous districts are dotted by dozens of unfinished building projects abandoned by bankrupt developers. And the small inner circle of prosperity is surrounded by areas of the city of 3 million that are little changed from the crumbling squalor of the Ceausescu era.

Protests that have gathered tens of thousands over the past months reflect the deep dissatisfaction with the country's economic crisis, which pushed Romania to the brink of bankruptcy two years ago.

An IMF-led bailout allowed the government to pay wages and pensions. But the strict conditions have led to unpopular belt-tightening: wages in the public sector were slashed; the sales tax was hiked to 24 percent, one of the EU's highest; heating subsidies and unemployment, maternity and disability benefits were cut.

The economy continues to shrink after a 7.1 percent plunge in 2009 although at a slower pace. In a nation with an average monthly income of euro325, most here can only roll their eyes at the Prada outfits and Louis Vuitton bags on display on the upscale Calea Victorie.

"This isn't capitalism, in capitalist countries you have a middle class," complains convenience store manager Maricela Popa. Society here, she says, is divided into a tiny minority of rich people and a vast impoverished underclass.

Popa, like others, remembers the days when most enjoyed a steady job, state housing, and government-subsidized holidays on the Black Sea coast.

"I regret the demise of communism - not for me but when I see how much my children and grandchildren struggle," says 68-year-old retired mechanic Simion Berar. "We had safe jobs and decent salaries under communism. We had enough to eat and we had yearly vacations with our children."

It's not the first resurgence of communist nostalgia.

A decade after communism's overthrow in 1989, 61 percent of those polled said their living standards were higher under Ceausescu. Back then though, Romania was going undergoing economic meltdown even worse than now - and more people were alive who remembered the communist good times.

A common thread in this country rife with conspiracy theories is suspicion that Romania's 1989 revolution was "stolen" - that the communists and Securitate secret police continue to rule, first by orchestrating the uprising against Ceausescu, then subverting it to take behind-the-scenes control.

"In 1990, I thought there would be real, fair competition that the best and the most hardworking people would succeed like in the American dream," says architect Valentina Lupan.

"When I realized that impostors, the former Securitate and thieves had become the richest people and run Romania, I lost hope, not for me, but for my children."

Government indecision compounds the yearning for a hero in a nation that has traditionally looked to larger-than-life leaders - be it the medieval Vlad, who battled the Turks, or Ceausescu, who defied the Kremlin in establishing a degree of autonomy within the Soviet bloc.

That yearning is reflected in the recent success of "The Autobiography of Nicolae Ceausescu," a largely sympathetic biopic that played to full audiences at a downtown cinema complex.

Valentin Ceausescu, the bookish son of the late strongman, insists he's not interested in politics - but points to a shift in the national mood.

"People have started coming up to me and saying, 'why aren't you running for president?'" he says.


Associated Press writers Alison Mutler and Alina Wolfe-Murray in Bucharest and Vladimir Zhelyazkov in Sofia, Bulgaria contributed to this report.

Mobius Wants Romanian Fund to Buy Stakes in Regional Companies

Jan. 17 (Bloomberg) -- Mark Mobius, who oversees $34 billion for Templeton Asset Management, plans to diversify Romanian Property Fund’s portfolio with central and east European companies after the fund’s Jan. 25 share sale.

Franklin Templeton Investment Management Ltd., which manages the 3.6 billion-euro ($4.8 billion) Romanian fund known as Fondul Proprietatea SA, wants to “get rid of” unprofitable businesses and buy stakes in regional companies, such as Austrian banks and refineries, that have exposure to Romania, Mobius said in an interview in Bucharest today. The restitution fund will be sold directly to investors on the Bucharest Stock Exchange.

Fondul Proprietatea owns stakes in 83 companies, including Romania’s largest oil company OMV Petrom SA, Transelectrica SA and Transgaz SA, the state’s power and natural gas transportation grids, natural gas producer Romgaz SA and atomic power company Nuclearelectrica SA. The fund was set up to compensate Romanians for property confiscated under communism.

“The first objective for Fondul Proprietatea is to invest in Romania and to encourage companies in Romania but if there are foreign companies that have exposure to Romania then we would be interested,” Mobius said. “It could be any sector, and there are not that many at this stage, but we would be interested in any company, let’s say companies in Austria, banks, oil companies.”

Fondul Proprietatea may sell shares on international markets, such as London, Vienna or Warsaw by the end of this year and may attract strong interest from international investors, he said.

Emerging-Market Popularity

“Right now the emerging markets are generally popular because of the high growth and tremendous performance so we get a lot of money coming into these emerging-market funds and more importantly the frontier-market funds, and Romania is a frontier market,” Mobius said.

Fondul Proprietatea forecast net income to increase this year to 207 million lei ($64.72 million) from an estimated 195 million lei last year. The future profitability depends on the government’s decision to sell stakes in energy companies and the “attitude towards foreign investors,” according to Mobius.

Romania is preparing to offer minority holdings of its utilities to meet international bailout conditions and cover infrastructure investments. It also plans to sell a 9.84 percent stake in Petrom on the stock exchange this year and a minority stake in Romgaz as well as plans to finish selling shares in Transgaz and Transelectrica, Economy Minister Ion Ariton said on Nov. 18.

Fondul Proprietatea’s portfolio manager, Greg Konieczny, also said today in an interview that Romania should consider selling shares in state-owned companies Nuclearelectrica and hydro-power producer Hidroelectrica, by next year.

--Editors: James M. Gomez, Hellmuth Tromm

To contact the reporter on this story: Andra Timu in Bucharest at

To contact the editor responsible for this story: James M. Gomez in Prague at

AP: Romania's government fires its 2 top police officers over alleged illegal hiring of staff

BUCHAREST, Romania - A Romanian government official says the country's two top police officers have been fired after a probe revealed that they illegally hired staff.

Interior Ministry official Ioan Dascalu says prosecutors have charged Gendarme chief Olimpiodar Antonescu and his deputy Nicolae Rugina over an alleged abuse of their position. Three other officers have been dismissed in the case as well.

Monday's firing comes after months of tensions between the gendarmes and President Traian Basescu and Prime Minister Boc, who were angry about a police protest outside the presidential palace in September.

Thursday, January 13, 2011

Romania threatens to leave Francophony organisation

Angered by the attitude of France, its traditional ally, towards its bid to join Schengen, Romania is considering leaving the OIF, the International Francophony Organisation, a leading Romanian MEP told EurActiv yesterday (12 January).


Schengen is a village on the border between Luxembourg, France and Germany, where an agreement was signed in 1985 to gradually abolish checks at common borders between those countries, the Netherlands and Belgium.

Gradually, the process was taken further. In 1995, border controls were abolished between Belgium, Germany, France, Luxembourg, the Netherlands, Spain and Portugal.

Today, the Schengen border-free area consists of 25 member states: 22 EU countries (all except Bulgaria, Romania, Ireland, the UK and Cyprus) as well as three associated countries: Norway, Iceland and Switzerland. Denmark has signed the Schengen agreement, but has kept its freedom not to apply certain measures.

The UK and Ireland decided to stay outside the Schengen area.

Romania and Bulgaria, which joined the EU in 2007, remain outside the agreement due to shortcomings in their police and judicial systems. Both countries were placed under a special monitoring system, called a Cooperation and Verification Mechanism.

In September 2010, EU ministers for European affairs decided to extend the monitoring for another year.

Adrian Severin, a former foreign minister and a heavyweight in the European Parliament's Socialists & Democrats group, said that Romania was considering different scenarios, depending on the reasons given for the decision that its accession to Schengen, the border-free area of the EU, will be postponed.

Diplomats have already unofficially announced that Bulgaria and Romania will not be admitted to Schengen in March, as Sofia and Bucharest had hoped.

The reason, they said, is that according to the expert report on the two countries' preparedness to join the EU border free area, Bulgaria had failed to secure its border with Turkey. "We cannot admit Romania without Bulgaria," one diplomatsaid.

Moreover, before Christmas, the French and German interior ministers, Brice Hortefeux and Thomas de Maizière, wrote a letter to EU Home Affairs Commissioner Cecilia Malmström, warning that Romania and Bulgaria lack satisfactory legal and administrative environments in the field of justice and home affairs.

The ministers argued that corruption persists at different levels, and in the case of Bulgaria, there is a consistent presence of organised crime.

When Bulgaria and Romania joined the EU in 2007, deficiencies still remained in their police and judicial systems. Both countries were placed under a special monitoring system, called a Cooperation and Verification Mechanism (CVM).

Now, France and Germany appear to link the issue of Schengen accession to the CVM, disregarding the view of the Commission, which believes the two issues are legally unrelated. Regarding Schengen accession, Romania has reportedly almost met the technical criteria, with Bulgaria only close behind.

Two options

In this context, Severin said there were two options. The most optimistic of these would see Romania and Bulgaria told that their Schengen accession will be postponed until the autumn or the beginning of next year, by which time they would have met very clear technical requirements. Romanian would apparently not make waves about this scenario.

But there is also the option of refusing Bulgaria and Romania accession based on the arguments outlined in the joint Franco-German letter. In that case, Romania would consider a very strong response, Severin said.

The decision is expected to be announced at a 24-25 February meeting of EU justice and home affairs ministers in Budapest.

The Romanian MEP explained that if his country were denied Schengen accession as a result of corruption, it would prompt a very long delay. Indeed, French experts would always be able to claim that corruption in Romania persists, he added.

In such a case, despite the fact that the Romanians are a Latin people, many of them speak or understand French and the country is bound by a century and a half of friendship with France, Severin said Bucharest would leave the OIF, sending a strong message to Paris.

Although he is in opposition, the Romanian MEP appeared to be passing on an official message, as in his words, the Schengen case was a test case for the kind of relationship his country will have with the rest of the EU in the long term.

In Severin's words, Romania's Ministry of Foreign Affairs, of which he was in charge in 1996-1997, had concluded that the country would never be taken seriously in the EU until it used its veto on issues of major importance.

According to an EU diplomat who asked not to be named, it is not surprising that Bucharest is issuing warnings ahead of the EU's decision. Apparently, the Hungarian EU Presidency was sympathetic to Sofia and Bucharest, he added.

Bulgaria is also a member of the OIF. However, the Bulgarian tactics with respect to Schengen accession are of appeasement vis-à-vis Paris and Berlin, not of defiance. Severin said Bucharest was disappointed by Sofia's attitude, but indicated that this was not a big issue for his country.

Romanian Central Bank Unlikely to Change Rates on Inflation, Isarescu Says

Romania’s central bank is unlikely to change interest rates as it battles to slow inflation, which accelerated to the fastest pace in more than two years after a tax increase boosted prices, Governor Mugur Isarescu said.

The Banca Nationala a Romaniei’s main goal in 2011 will be to damp inflation prompted by a 5 percentage point increase in the value-added tax in July, Isarescu said yesterday in an interview in Bucharest. The inflation rate rose to 8 percent in December, more than double the 3.4 percent forecast for end- 2011.

The first-round effects of the VAT increase have been “reasonable,” allowing the central bank to keep its main interest rate unchanged for a fifth meeting on Jan. 5 at a record-low 6.25 percent, Isarescu said.

Keeping the rate steady “has eased second-round effects from the VAT increase,” he said. “If one raises the interest rate, that will generate expectations and create second-round effects. So this is where our resistance” to changing interest rates comes from. “It’s very important to stand fast like at Stalingrad. Monetary policy

Romania, which took a $26 billion bailout from international lenders in 2009 after a recession eroded budget revenue and put pressure on the currency, raised the value-added tax to 24 percent in July to meet a budget-deficit target of 6.8 percent of economic output in 2010 and 4.4 percent this year.

Slumping Economy

The Balkan nation’s economic contraction extended to a seventh quarter with the second-biggest slump in the EU after Greece in the third quarter as the VAT increase and wage cuts sapped demand. Gross domestic product shrank 2.5 percent in the three months ending in September from a year earlier.

The economy will “certainly” post growth of 1.5 percent this year, led by exports and industrial-output gains. The economy probably contracted 2 percent in 2010, after shrinking 7.1 percent in 2009, according to forecast from the IMF and the government.

The global financial crisis put pressure on the leu, which weakened 2.88 percent against the euro in the last 12 months to make it the worst-performing emerging-market currency of the 176 ranked by Bloomberg. The leu traded at 4.2538 to the euro at 6:28 p.m. in Bucharest.

The central bank doesn’t officially target a specific currency rate and has been operating on the foreign-exchange market to prevent “excessive liquidity” from causing “ample leu moves” as the Finance Ministry changed foreign-currency loans into leu, Isarescu said.

“We support a managed float but we’ve never defined the margins,” Isarescu said. “Some people said that I mentioned a leu trading range of 4.1 to 4.3 per euro, so I personally replied that if the range for the leu is between 4.1 and 4.3, then I like it.”

The next central bank policy meeting will take place on Feb. 3.

To contact the reporter on this story: Irina Savu in Bucharest at; Andra Timu in Bucharest at

To contact the editor responsible for this story: James M. Gomez at
will generally stay on target.”

Wednesday, January 12, 2011

Romania 2010 Inflation Quickens to 8%, Tops Central Bank Target

Romania’s inflation rate rose to the highest in more than two years, exceeding the central bank’s target for the fourth consecutive year, as a 5 percentage-point increase in a consumption tax in July boosted prices throughout the economy.

The rate advanced to 8 percent in December, matching the highest since August 2008, from 7.7 percent in November, the Bucharest-based National Statistics Institute said today in an e-mail. On the month, prices rose 0.5 percent. The rate was below a central bank’s year-end forecast of 8.2 percent published in November. The bank sees the inflation rate falling to 3.4 percent by the end of this year, as the effects of the tax increase wane.

Romania, which turned to international lenders for a bailout in 2009 after a recession eroded budget revenue and put pressure on the currency, raised the value-added tax to 24 percent in July to meet a budget-deficit target of 6.8 percent of economic output in 2010 and 4.4 percent this year. It got a 20 billion-euro ($26 billion) bailout from the International Monetary Fundand the European Union.

“Adverse foreign-exchange and food-price shocks are the key risks to the inflation outlook for 2011,” Citigroup Inc. economists Ilker Domac and Gultekin Isiklar wrote in a note today before the inflation report. “With these risks in mind, we think the large negative output gap is likely to contain inflationary pressures.”

Inflation Target

The Banca Nationala a Romaniei targeted inflation of between 2.5 percent and 4.5 percent at the end of 2010, from 4.7 percent at the end of 2009, as plunging consumption helped rein in consumer prices. The bank kept its main interest rate unchanged at a record-low 6.25 percent on Jan. 5, as policy makers maintained a prudent stance to bring inflation back to its medium-term target.

Food-price inflation accelerated to an annual 6.5 percent in December compared with 6 percent in November, the institute said. Prices for services rose an annual 6.4 percent compared with 6.1 percent and non-food prices gained 9.8 percent, compared with 9.7 percent the previous month.

Romania’s economy shrank 2.5 percent on the year in the third quarter of last year, posting the second-worst contraction in the European Union after Greece, as the government’s tax increase and a 25 percent reduction in public wages last year choked demand.

The economy will probably return to growth this year led by exports and industrial output gains, after posting a 2 percent contraction in 2010, according to forecasts from the IMF and the government.

The Balkan nation’s industrial production growth accelerated in November to an annual 4 percent from 2 percent in October on increased demand from western Europe for the country’s manufactured goods, such as cars, textiles, chemicals and steel products, the institute said in a separate statement. On the month, industrial production rose 1.6 percent in November.

To contact the reporter on this story: Irina Savu in Bucharest at

To contact the editor responsible for this story: James M. Gomez in Prague

Raul Volcinschi, a former anti-communist Romanian dissident, dies at 89

BUCHAREST, Romania - Raul Volcinschi, an anti-communist dissident who risked his life to fight for democracy in Romania, has died. He was 89.

Volcinschi died Sunday at his home in Cluj city, said Octav Bjoza, head of Romania's Former Political Prisoners Association. The cause of death was not given.

Volcinschi was imprisoned in 1956 for taking part in a student riot supporting an anti-Moscow uprising in neighbouring Hungary. He fled from a high security prison, in an attempt during which another man was shot dead. He was later re-captured and sent to another prison before being released as part of a general amnesty for political prisoners in 1964.

In 1983, he was involved in an unsuccessful plot to assassinate Nicolae Ceausescu, Romania's communist dictator, according to the book "The Trial of Communism."

Ceausescu ruled Romania for 25 years before being ousted and executed during a 1989 anti-communist revolt that killed hundreds of people.

Volcinschi was born into a family of intellectuals, and graduated law at Cluj University. But his opposition to the communist regime meant he could not practice law, said Radio Cluj journalist Vasile Tomoiaga.

"He was intransigent and isolated, at war with everyone until the end," Tomoiaga said. "He was disappointed with Romania, but was lucid and had a good eye for detail."

Tomoiaga last interviewed Volcinschi on Nov. 18, and was later told by the family that he had suffered a stroke in December.

After the end of communism, Volcinschi created a small anti-communist party and tried to secure an amnesty for three workers who were convicted in 1983 assassination plot against Ceausescu. The three were granted individual amnesties in 1999.

After 2000, he became close to populist politician Gigi Becali who is now a European Parliament member for the nationalist Greater Romania Party. In 2008 prosecutors charged Volcinschi with making a false statement in a soccer bribery case involving Becali.

Volcinschi is survived by a wife and daughter. He will be buried in the southern city of Craiova at a family burial plot.

Tuesday, January 11, 2011

Romania: a rough ride to market

Financial Times
January 10, 2011 

Stefan Wagstyl

The long ride from Communism to capitalism in central and eastern Europe includes many a hurdle.

In Romania the government has got itself into a twist in trying to encourage privatisation and stock market development whilst also trying to squeeze cash out of state-controlled companies to plug budget deficit holes. Its contradictory approach has put Franklin Templeton Investments, the US-based investment manager, in an awkward spot.

Franklin Templeton’s emerging markets team is preparing the stock market flotation this month on the Bucharest exchange of Fondul Proprietatea, a €3.4bn government-backed company created to compensate Romanians ex-propriated under Communism.

Fondul, in which the state holds 39 per cent with most of the rest distributed among Romanian individuals, owns stakes in 83 companies, including Petrom, the oil group, and Transelectrica and Transgaz, the electricity and gas grids.

In theory, the flotation should be an excellent way of bringing new investors into a wide spread of companies in a key new member of the European Union.

In practice, the Bucharest stock exchange listing has been overshadowed by a rowbetween Franklin Templeton and one of Fondul’s key portfolio companies, Romgaz, the national gas group.

Franklin Templeton’s emerging markets team, headed by high-profile chairman Mark Mobius, ran into trouble with Romgaz within weeks of taking over Fondul’s management in September. Franklin Templeton launched legal action after Romgaz, where the state has 85 per cent, agreed to a government demand for a special 400m lei ($122m) ‘donation’ to public funds to help ease the budget deficit.

Franklin Templeton, owner of the remaining 15 per cent of Romgaz, is pulling no punches. It has called a Romgaz general meeting to vote on revoking the company’s directors and start individual legal actions against them. That is scheduled for January 17, just days before Fondul is set to float on January 25.

Nor is the US fund manager opting for quiet diplomacy. In a statement last week. Mobius warned:

The Romanian Government is taking a serious risk with foreign investors by following this course of action. We have strongly opposed such measures as we firmly believe they are detrimental since it could cause investors to lose confidence in the Romanian government’s willingness to honor its bond and the debt obligations as well as obligations to shareholders and suppliers of government owned companies.

That is hardly an idle threat at a time when Bucharest is dependent for its external financing on a Euro20bn International Monetary Fund/EU financing programme. It is fighting to reduce its budget deficit from 6.6 percent of GDP last year to 4.4 percent for 2011 in the face of sluggish growth forecast at 2 per cent for thie year.

Given that Romania’s leaders have often preferred short-term fixes to sound long-term polcymaking it would be no surprise that if this time too, they stick to fleecing Romgaz. But the long-term costs are not to be underestimated.

Since the global crisis, international investors have become very choosy about which CEE countries they back, generally preferring the central European heartland of Poland, the Czech Republic and Slovakia to the more distant reaches of the Balkans. If this distinction persists, Romania will be in trouble. The eventual bill for Romgaz’s 400m lei could be very heavy.